First time buyer and deposit

cashbackproblems

Hi

Im looking to buy my first property aged 23yrs, i have no debts and am currently earning just 17.5k with no dependants/major outgoings. I got a mortgage quote from HSBC for 80k and am looking at 2 bedroom houses which are around 80k-90k in my area.

I was wondering if i got the 80k mortgage and the house was 80k would i not need to pay a deposit? I can cover the solictor fees etc but would the bank be ok with it being a 100% mortgage. I can easily afford the monthly repayements they quoted me.

Thanks

poppysarah

Erm what did the mortgage quote say about a deposit?
Was it off the interweb?

You really need a deposit.

Save - save - save!

G_M

No one offers 100% mortgages any more. They (and 110% mortgages) recently caused a little financial hiccough called 'the credit crunch'. Speak to HSBC or better still an independant financial advisor or mortgage broker.

Doshwaster

The minimum you will need is 10% deposit + £3-5k legal and other costs. To get a decent mortgage rate you need more like 20-25% deposit.

In the "boom times" banks were offering 100% (or even higher) mortgages on the basis that if you couldn't pay the mortgage or dropped down dead a year later they could still make a profit by selling the house as the price would have gone up.

Not now.

Prices and interest rates may have come down over the last 2 years but deposits have gone up. If you have a big cash deposit, generous parents or existing equity then now may be a good time to move (which is what I'm trying to do myself), but if you have no savings then I'd forget about it until you have a decently sized piggy bank.

cashbackproblems

No this quote was in branch, bascially at the time i said the properties were 90k so id provide the 10k deposit and they give me 80k, but now iv seen a few for 80k so am thinking i can get a full mortgage for them, would the terms change if im not paying a deposit?

I do have about 10k-15k in savings but would prefer to keep this in the bank and in the future (3yrs+) might consider renting out the property as i will be working abroad.

<sebb>

The quote you were given would have been dependant on the amount of deposit you had. Each bank has their own criteria for the size of the deposit you need. This is known as the Loan to Value (LTV) ratio. Most offer a choice of products each with their own LTV criteria. The smaller the deposit you have, the higher interest you'll need to pay. It looks like the quote you were given was based on around a 90% LTV meaning you would need to pay at least a 10% deposit to get that mortgage.

They will only give you £80k provided you have 10% of the value of the house as a deposit.

As others have said, no-one offers 100% LTV mortgages anymore, so your bank simply would not lend it to you without a deposit. Even 90% mortgages are rare these days and are expensive too.

So if you want to buy an £80k house, you'll need at least £8k deposit. And dont forget the money you need for fees too!

If you can get hold of a higher deposit, say 20% or preferably 25% you'll open yourself up to a much bigger choice of mortgages and much better rates. Best speak to a mortgage advisor to discuss your options. Just going to your local branch for a mortgage is not likely to get you the best rate. You need to shop around!

Also, bear in mind that if you want to let it out in the future you'll need to get permission from your lender so that might be worth checking to.

Doshwaster

cashbackproblems wrote: »

I do have about 10k-15k in savings but would prefer to keep this in the bank and in the future (3yrs+) might consider renting out the property as i will be working abroad.

How much interest are these savings making in the bank? The main reason I'm buying now is that I now have amassed about £40k which is earning diddly squat in interest. Over the next few years it's better off invested in (touch wood) a rising housing market.

brit1234

Doshwaster wrote: »

How much interest are these savings making in the bank? The main reason I'm buying now is that I now have amassed about £40k which is earning diddly squat in interest. Over the next few years it's better off invested in (touch wood) a rising housing market.

Far more likely to be a falling housing market, there simply isn't the funds to allow prices to go up sustainbly especially when gov funding ends for banks shortly.